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Investment Funds

Alternative Investment Funds (AIFs)

AIF (Alternative Investment Fund) under the AIFMD Directive of the EU is an onshore Cyprus and European regulated investment fund (Full EU Cross Border Fund), that operates for the sole purpose of collective management of its portfolio by investing in any predefined asset class and/or other liquid/illiquid instruments to the interest of its shareholders.

 Registered Alternative Investment Funds (RAIFs)

A RAIF is similar to AIF however; it is registered and regulated under the responsibility of the AIFM hosting it, whereby all operational and marketing efforts are conducted under the liability of the AIFM as a European fully passported Fund Management Structure.

AIFs or RAIFs Characteristics

  • AIFs or RAIF follow similar legal and regulatory principles whereby they are both considered a Fund with Its shares redeemed or repurchased directly or indirectly by its assets following an application of its shareholders as defined the Fund’s Prospectus.
  • Its capital is increased by the issue of new shares, whereas its capital is decreased by the redemption or the repurchase of the old ones. Hence it adopts the Variable Capital Investment Company statutes.
  • The value of its shares is reflected by the net asset value (NAV) of its assets.
  • AIF’s are marketable to qualified, professional or institutional investors both internationally and within the EU member States (full pass-porting rights within EU).

Why Cyprus

  • Cyprus is one of the most efficient jurisdictions for Funds in Europe in all areas (e.g. administration, auditing, and custody/depository fees)
  • Efficient, experienced, responsive, and accessible regulatory authority (CySEC)
  • License granted by CySEC is valid to all EEA jurisdictions
  • Financial reporting system based on IFRS and compliant with OECD guidelines

Tax Considerations

  • Low corporation tax 12.5% (special exemptions apply for shipping companies)
  • Notional Interest Deduction on new equity
  • Excluded from tax on i) dividends received, ii) profits on the sale of securities, iii) capital gains arising from the sale of property abroad, iv) capital gains from the sale of shares of foreign companies
  • No subscription tax on the net assets of the fund
  • Common funds and Partnership Funds are tax transparent; Added substance, as it is very difficult to challenge that management and control is not performed in Cyprus
  • Taxation of Fund Manager
  • Double Tax Treaties Cyprus double tax treaty agreements
  • Normal VAT rules apply
  • VAT on Management and Administration
  • No VAT charged on services in respect of investment management, administration and marketing services supplied in Cyprus or abroad to Funds, which are carrying on business in Cyprus

Licensing Process

  • The process has the following main steps:
  • The legal vehicle for the fund must be registered with registrar of companies (FCIC, VCIC or LLP).
  • All the personnel and/or external associates involved in the fund must be identified and committed through letters of intent
  • The prospectus must be prepared
  • Preparation and submission to CySEC of application with all necessary supporting documents.
  • Approval and commencement of operations

 

AIF-UNP

AIF-LNP

RAIF

Management Type

Externally Managed

Internally Managed

Externally Managed

Internally Managed

Externally Managed

Supervising Authority

CySEC

CySEC

Indirectly supervised and regulated by CySEC through the Manager

Legal Forms

Mutual Fund

Fixed or Variable Capital Investment Company

Limited Partnership, with or without legal personality

Fixed or Variable Capital Investment Company Limited Partnership, with or without legal personality

Mutual Fund

Fixed or Variable Capital Investment Company

Limited Partnership, with or without legal personality

Physical Office

The manager’s offices can be used

Required

The manager’s offices can be used

Required

Not Required

Number of Directors

Minimum 2 (1 Executive Director)

Minimum 4 (2 Executive Director)

Minimum 2 (1 Executive Director)

Minimum 3 (1 Executive Director)

Minimum 2 (1 Executive Director)

Marketing

Professional and/or Well - Informed Investors

Retail Investors

Professional and/or Well - Informed Investors

Professional and/or Well - Informed Investors

Number of Investors

Unlimited

No more than 50

Unlimited

Investment Restrictions

Investment Restrictions apply depending on the investment strategy and type of investors

No requirements or limitations

Limited rules may apply

Capital Requirements

No initial requirement

€125,000 initial requirement

No initial requirement

€50,000 initial requirement

No initial requirement

Assets Under Management with the first 12 months

€500,000

€250,000

€500,000

Assets Under Management

The assets under management should reach the threshold for AIFM registration set in the AIFM law being:

• €100 mil with leverage, or

• €500 mil without leverage and a lock up period of 5 years

The assets under management should reach the threshold for AIFM registration set in the AIFM law being:

• €100 mil with leverage, or

• €500 mil without leverage and a lock up period of 5 years

No limitations

Fund Manager

Fund Manager licensed in the EU, MiFID Investment Firm, Cyprus Mini-Manager (to be enacted), EU Sub-threshold AIFM

N/A – Internally Managed

Third country manager, UCIT Manager licensed in the EU, MiFID Investment Firm, EU Sub-threshold AIFM, Cyprus Mini-Manager (to be enacted)

N/A – Internally Managed

Externally managed by an AIFM established in Cyprus or within another EU Member State, RAIFs structured as limited liability partnerships may also be externally managed by managers other than AIFMs subject to conditions

Portfolio Management

By the manager

By the AIF board

By the manager

By the AIF board

By the manager

Depositary

Mandatory appointment of a local Depositary if managed by an AIFM Cyprus, EU, or in a third country based if AIFM is not appointed

Cyprus, EU or in a third country based. May be waived if one of the following criteria is met:

• total assets of the Fund < 5 mil

• up to 5 Investors

• no more than 10% of total assets are subject to custody and; investors up to 25 and; minimum investment per investor is at least equal to EUR 500.000

Mandatory appointment of a local Depositary if managed by an AIFM Cyprus, EU, or in a third country based if AIFM is not appointed

Unit transferability

freely no limitations

freely as long as the number of investors do not exceed 50 and the potential transferees are Professional and/or Well - Informed Investors

freely as long as the potential transferees are Professional and/ or Well - Informed Investors

CySEC Application Fees

€1,800 plus €400 for each additional investment compartment

€1,300 plus €300 for each additional investment compartment

€400 plus €100 for each additional investment compartment

CySEC Annual Fees

€1,800 plus €400 for each additional investment compartment

€1,300 plus €300 for each additional investment compartment

€400 plus €100 for each additional investment compartment

 

We help you with

Supporting your AIF from the start

From the inception of your fund, our team will help you to establish your AIF.

Whatever is your target: Safeguarding of Assets, Return on Investment, Tax Optimisation – the appropriate AIF structure can be prepared to suit your needs.

Relating to these important early stages, our value-added services include:

  • Close collaboration with all Fund key players.
  • Coordination with lawyers, auditors and other service providers.
  • Tailored prospectus and investment procedures to fit your needs
  • Participation in reviewing the Fund’s documentation (Prospectus, Articles of Incorporation, etc).
  • Guidance on safekeeping requirements for financial and non-financial assets.
  • We can further support you in dealing with the regulatory authorities.

Our capabilities cover a wide range of disciplines:

  • Fund formation and implementation.
  • Regulatory understanding.
  • Familiarity with legal structures.
  • Specific asset class experience.
  • Project management.
  • Relationship management.
  • Board Representation is possible depending on qualifications and regulatory approval.
  • Members of our team may be appointed as the Risk Manager, the Compliance Officer or the Internal Auditor of your investment fund.

Let’s start a conversation about your AIF.

We would be pleased to hear more about your project and help you ensure its success.

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Members of the Cyprus Investment Funds Association (CIFA). Registered Service Provider for the Cyprus Investment Program. Member of the Cyprus-India Association. Our team are Certified Persons in the Public Register of the Cyprus Securities and Exchange Commission (CySEC) and members of ICPAC